Retail Sales Up Just 0.1% in May

Consumers, who spent with abandon in April, cut back last month as economic activity remained weak in most parts of the country.

The Commerce Department reported that retail sales edged up just 0.1% in May, far below the 1.4% rise in April, while the Federal Reserve said that its latest “beige book” survey of business conditions showed widespread sluggishness in April and May.

Taken together, the reports depicted an economy that still is flirting with recession and in need of interest rate relief from the Federal Reserve, analysts said.

Federal Reserve Vice Chairman Roger Ferguson told Congress on Wednesday that he believed the country still is “in a period when the economy is growing quite slowly.”

He said the continued “downside risk” is that news of rising job layoffs will mean that “consumers begin to pull in their horns a bit,” cutting back on spending.

The tiny 0.1% increase in retail sales in May followed a revised 1.4% surge in April sales, the biggest increase since a 1.5% advance in January.

Analysts said that averaging together the two months showed a consumer sector that is continuing to spend at a solid pace despite the sluggish economy, higher energy prices and rising job layoffs.

Excluding a 0.7% drop in auto sales, overall retail sales would have been up by 0.3%. Sales at auto dealers fell 0.7% in May, after a 2.3% jump in April.

Sales at gasoline stations rose 1.4%, after a 4.2% rise in April.

Sales at general merchandise stores dropped 1.3%, and clothing sales fell 1%.

The Fed’s latest economic survey, compiled from information collected before June 4, showed that conditions remained soft with rising unemployment rates dampening wage demands, helping to keep inflation moderate despite higher energy and health-care costs.

Manufacturing activity slowed in all districts in May with widespread reports of falling demand for telecommunications equipment and scattered reports of falling orders at plants making furniture and computer chips.

Separately, the Labor Department said that costlier petroleum pushed up U.S. import prices in May--the first such pickup since September. Import prices gained 0.3% last month, after dropping 0.6% in April.

Still, prices for imported goods were 0.8% below year-ago levels.